Financial market developments seem to affect cattle futures with surprising frequency, particularly when traders see U.S. dollar and equity indexes diverging. For example, the combination of greenback strength and tumbling stock prices, as seen Thursday, usually translates into reduced export and domestic demand, respectively, for American products. Thus, it was not terribly surprising to see cattle leading the livestock complex lower this morning. Flat midday beef quotes didn’t help the situation, since packer margins remain deep in the red. On the other hand, bulls may get a fresh boost after country cattle began trading around 127 cents/pound, which represents a 1.0 cent rise from last week. February live cattle futures fell 0.72 cents, to 133.05 and its April counterpart slumped 0.37 cents to 136.72 cents/pound.
The hog market also seemed unable to overcome the negative economic implications of the Thursday combination of dollar strength and equity index losses, although they posted a substantial rebound later in the CME session. Anticipation of late-year cash and wholesale weakness may be undercutting Chicago hog prices at this point, especially with pork loin values repeating their recent pattern of flattening out during the year-end holiday season. The industry should probably expect a great deal of book-squaring Friday, since the end of the year is looming and the quarterly USDA Hogs & Pigs report will be released at 2:00 PM CST. February hogs tumbled 0.42 cents to 87.02 cents/pound Thursday, while the June contract dropped 0.50 cents to 100.15.
After marching steadily higher in recent weeks, cotton futures reached a major high Thursday morning. However, industry concerns about the negative impact of going over the fiscal cliff apparently undercut the white fiber market, since the implied increase in taxes might easily cause consumers to curtail their apparel purchases in early 2013. The resulting price drop was probably exaggerated when the March contract violated technical support associated with its 10 and 200 day moving averages. The inability to sustain the Wednesday push above the 200-day MA may bode ill for the short-term outlook, especially since many fund managers like to clean up their books at the end of the calendar year. Conversely, the nearby contract climbed back above its 10-day MA, thereby implying considerable underlying support. March cotton ended the day 1.05 cents lower at 76.01, while December fell just 0.52 to 78.49 cents/pound.